Japan's Toyota Motor Corporation has raised its profit forecast for the fiscal year 2027 (April 2026 to March 2027) by 250 billion yen (approximately $2.27 billion), now projecting a net profit of 3.25 trillion yen (about $29.5 billion). This increase is attributed to a revised yen-to-dollar exchange rate estimate, which was adjusted from 150 yen to 160 yen per dollar, resulting in a profit boost of 480 billion yen. Toyota also announced a plan to buy back up to 1 trillion yen worth of its own shares.
According to the Nihon Keizai Shimbun (Nikkei) on August 4, Toyota reported a 10% increase in first-quarter operating revenue (sales) for fiscal 2027 (April to June 2026), totaling 13.5254 trillion yen, while operating profit fell by 9% to 1.0634 trillion yen. However, net profit surged by 76% to 1.477 trillion yen. Despite accounting for a 60 billion yen loss due to the halt in development of the next-generation electric vehicle (EV) 'LF-ZC', the weak yen supported overall performance.
For the entire fiscal year 2027, Toyota forecasts a consolidated net profit of 3.25 trillion yen, a 16% decrease from the previous year. This figure is an increase of 250 billion yen from the earlier estimate of 3 trillion yen. Operating revenue is expected to rise by 7% to 54 trillion yen, while operating profit is projected to decline by 10% to 3.4 trillion yen. Compared to previous forecasts, operating revenue and profit have been adjusted upward by 3 trillion yen and 400 billion yen, respectively.
The primary factor behind the improved profit outlook is the weak yen, with the exchange rate estimate for the fiscal year raised by 10 yen to 160 yen per dollar. Toyota estimates that for every 1 yen depreciation against the dollar, operating profit increases by 50 billion yen, and for every 1 yen depreciation against the euro, it rises by 10 billion yen.
Additionally, Toyota has revised its expectations for the negative impact of Middle Eastern geopolitical tensions on its performance, reducing the anticipated decline in operating profit from 670 billion yen to 510 billion yen due to production cuts and rising raw material prices. The company has changed its export route for shipments to the Middle East, now transporting them overland before passing through the Strait of Hormuz. The surge in material prices has also subsided compared to the beginning of the fiscal year.
On the same day, Toyota announced its share buyback plan, which will run from August 5 to August 4 of next year, with a maximum of 500 million shares, or 4.22% of total issued shares, to be repurchased for up to 1 trillion yen. Excluding the tender offer for Toyota shares, this marks the second-largest buyback in history, following the 1.2 trillion yen buyback in 2024. The company plans to retire 200 million shares from its treasury stock.
Despite the raised profit outlook, Toyota's stock showed weakness. At one point in the afternoon, shares rose by 2.17% to 3,028 yen but later fell to 2,871 yen, ultimately closing down 1.52% at 2,918 yen.
The first reason for the decline is that the upgraded profit outlook fell short of market expectations. The operating profit forecast of 3.4 trillion yen is nearly 490 billion yen lower than the market average estimate of 3.8897 trillion yen. The net profit forecast also lags behind the market expectation of 3.633 trillion yen.
Exchange rates also played a role in the stock's decline. Following coordinated intervention by U.S. and Japanese authorities on July 31, the yen-dollar exchange rate fell to the 157 yen range, which is far from the 160 yen assumption used by Toyota. This raised concerns that the benefits of the weak yen on profits may be limited, prompting sell-offs.
Meanwhile, Toyota is maintaining its production and sales plans as previously outlined. The company aims to produce 10 million vehicles, including Lexus models, and sell 10.5 million vehicles during this fiscal year. It plans to adjust its next-generation EV development while enhancing the competitiveness of its hybrid vehicles. Additionally, from 2027 to 2028, Toyota will gradually transition its hybrid vehicle battery line in Japan from nickel-metal hydride to lithium-ion, targeting a capacity of 600,000 units. This change is expected to reduce costs by tens of thousands of yen per vehicle.
Toyota's global hybrid vehicle sales, including Lexus, are projected to exceed 5 million units for the first time this year. Chinese manufacturers are also increasing their investments in hybrid technology. In its announcement, Toyota revealed a long-term plan for China's CATL to produce hybrid batteries for Toyota in Indonesia, with an annual capacity of 200,000 units.
* This article has been translated by AI.
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